Child Benefit Income Tax Charges

Who Will Be Affected?

The charge will be applied to tax payers whose income exceeds £50,000 in a tax year and where either they, or their partner is in receipt of Child Benefit for the year. In the event that both partners have an income that exceeds £50,000, the charge will apply only to the partner with the highest income.

Child Benefit itself is not becoming taxable, the measure is simply to reduce or remove the financial benefit of receiving Child Benefit.

The Charge

For taxpayers with income between £50,000 and £60,000, the charge will be 1% of the amount of child benefit for every £100 of income that exceeds £50,000. Once the annual income reaches £60,000 the full amount of Child Benefit will be cancelled out by an equal amount of extra tax.

Example

The Child Benefit for two children amounts to £1,752.

The taxpayers adjusted net income is £57,750.

The charge on the taxpayer is 77% of £1,752 = £1,349

This is calculated as £57,750 - £50,000 = £7,750/100 = 77% (the result is rounded down to the nearest whole number)

Therefore for a taxpayer with adjusted net income of £60,000 or above, the income tax charge will equal the amount of Child Benefit.

If this applies to you and you would like more information please contact us

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